What are differences between EBITA and operating income?

The major differences between EBITA and operating income are as follows −

EBITA

• EBITDA is defined as sum of EBIT, depreciation and amortisation (or) sum of net profit, taxes, interest, depreciation and amortisation.

• It tells about company’s profit earning capacity.

• The earning capacity of an organisation is calculated.

• It is not recognised by GAAP.

• The adjustments are made (depreciation/Amortisation).

• It is calculated prior to operating income calculation.

Operating income

• Operating income is defined as difference between net sales, cost of goods sold and operating expenses.

• It tells about the profit earned due to operating activities.

• It calculates how much revenue is converted into profit.

• It is recognised by GAAP.

• No adjustments (depreciation/amortisation) are required.

• It is calculated after EBITA calculation.